Healthcare sector loses steam in California

Healthcare has long been one of the most reliable generators of new jobs in California. But a lousy economy has caught up with an industry once considered virtually immune to downturns.

The sector, which employs about 1 in 10 Californians, has stalled at a time when healthcare employment continues to grownationally. Gone are the days when nurses received fat signing bonuses. Fewer hospitals are recruiting healthcare workers from abroad, as they did in the early part of the decade. Some are cutting workers' hours, reducing their benefits and even laying off staff.

The ailment: the Golden State's 12.4% unemployment rate, third-highest in the nation. So many Californians have lost their jobs — and their company-sponsored health insurance — that many are going without treatment. In addition, employers increasingly are shifting healthcare costs to their employees in the form of higher deductibles and out-of-pocket costs. That's leading many workers to skimp on doctor's visits and postpone elective surgeries. Meanwhile, California legislators are slashing some public healthcare spending in the face of yawning deficits.

It all adds up to an uncharacteristically tough job market for medical workers such as James E. Key, 22. The Panorama City resident worked as a licensed vocational nurse at an adult day-care center until the state facility was shut down in April because of budget cuts. Saddled with $18,000 in student loans, he's trying to make ends meet by fixing cars and computers. To save money, he lives with his brother and mother.

"It's something I thought was going to be recession-proof," he said of nursing.

To be sure, healthcare remains one of the healthiest segments of the U.S. economy. Nearly 14 million Americans are employed in the sector. While employment growth has slowed in a sluggish economy, the field continues to add jobs: 318,000 nationwide since October 2009.

Meanwhile, medical employment has barely budged in California, where the healthcare sector gained just 9,000 jobs over the same period.

Trends that are crimping healthcare employment growth nationwide are squeezing California harder. Nearly 1 in 4 California residents lacked health insurance last year, according to a UCLA study, compared with about 1 in 6 nationwide. And California employers that provide health insurance benefits for their workers have seen their costs rise 8.4% this year, outpacing increases for businesses nationally, according to a recent survey by benefits consulting firm Mercer. That gives employers here more incentive to cut health benefits entirely or shift to cheaper plans with less coverage, leading workers to use less care. Lower demand is translating into fewer new healthcare jobs.

"In job training, we could always count on healthcare," said Michael S. Bernick, former head of the state Employment Development Department. "But now, even healthcare has been hit."

The fallout is hammering all manner of medical-related jobs, including support staff, nurses and technicians. The California Institute for Nursing and Health Care cited the "unexpected difficulty of new RNs finding employment" as one of California's "most pressing workforce issues" in a recent study.

The institute surveyed new graduates and found that only 57% were working as registered nurses in mid-2010. About 1 in 5 of those graduates who said they were not working in nursing said they had been trying to find employment in the field for more than a year.

Grace Bertolozzi-Price, 35, a former clothing marketer, decided to retrain for a career in nursing after her son was diagnosed with a seizure disorder. The Walnut Creek resident said she notched a 3.8 GPA at Cal State East Bay. But there was no job waiting when she graduated last December.

So Bertolozzi-Price volunteered for six months at a local hospital just to get a foot in the door. The strategy paid off: After four interviews, the hospital offered her a job, which she hopes to begin in early December.

She's grateful but stunned that it took so much time and effort. A nursing degree was supposed to be a ticket to ready employment.

"I never imagined not even getting a chance to practice my craft," she said.

Meanwhile, some California hospitals are cutting staff.

The Pomona Valley Hospital Medical Center laid off 180 employees and cut the hours of 100 in September. El Camino Hospital, in the heart of Silicon Valley, is in the process of reducing employees' hours and offering voluntary buyouts to trim its payroll. And the Salinas Valley Memorial Healthcare System has cut 10% of its 2,300 employees in the last two years, said Chief Executive Sam Downing.

"Employers want less expensive healthcare costs," Downing said. "We're in a major recession and people are trying to reduce their overhead."

A 2009 survey by the California Hospital Assn. found that 51% of hospitals had seen a decrease in admission and 58% reported a decrease in elective surgery. Nearly 60% reported an increase in uninsured emergency room visits, which has forced hospitals to look for savings elsewhere, including staff reductions.

Even the medical office market, long one of the brightest spots in commercial real estate, is slowing. Medical office building vacancy in Los Angeles currently is about 15%, up from 11.5% prior to the downturn, said John Wadsworth, a vice president at Colliers International.

The weakness in the healthcare field is not what Sara Turner expected six months ago when she got a phlebotomycertificate, qualifying her to draw blood. The degree was so sought after that she had to camp out in front of her Vista school to ensure she got a spot. Now, the onetime amusement park operator can't find work.

"They made it sound like it would be quite easy to get a job," said Turner, 20. "Now, there are jobs available, but they all want five or more years of experience."

An economy less dependent on the healthcare sector for growth might ultimately be a good thing, said Neeraj Sood, an associate professor at the Schaeffer Center for Health Policy and Economics at USC. Skyrocketing health insurance premiums have forced some companies to cut other costs, including spending on new hires.

The recently passed federal healthcare reform could help to reduce medical costs. That, Sood said, could create tens of thousands of new jobs annually in other industries.

"What's better for the economy is if you reduce healthcare spending, even if it hurts the healthcare sector," he said.